This is not unique to Tennessee. Rooted in centuries‐old English common law, Attorneys
General have this responsibility in a majority of states. The rationale is simple. Charitable gifts
are not the private property of the recipient but are donations with a larger purpose, often with
specific intentions regarding their use. Assets, donated or otherwise, controlled by public
benefit nonprofits are considered to be held in public trust, to be used purely for the benefit of
the public at large. In addition, nonprofit organizations enjoy a privileged status granted by the
state and are not governed by the same rules as for‐profit corporations. Therefore, decisions
regarding nonprofit assets and governance require oversight. As in other states, Tennessee
places responsibility for this oversight with the Attorney General.

An important example of the Attorney General’s responsibility is in the area of nonprofit
hospitals. In many rural communities, the local hospital is not only the closest emergency room
but also among the largest and most stable employers. Many of these are nonprofit or
community‐owned hospitals, also known as public benefit hospitals. Recent reports by industry
analysts and in the national business press predict a trend towards the sale of these public
benefit hospitals to for‐profit companies. If true, this may impact healthcare facilities in your
community. Public officials, attorneys, and executives involved with these hospitals should
keep in mind that, under Tennessee law, the Attorney General’s Office must review public
benefit hospital transactions for fairness before they are consummated.

When my office approved the sale of SRMC, we were acting pursuant to a law passed in 2006
by the legislature. The Public Benefit Hospital Sales and Conveyance Act of 2006 requires a
public benefit hospital to provide notice to the Attorney General 45 days before selling or
transferring control of its assets. The hospital must certify that each member of its board has
been given a copy of the 2006 law and publish notice of the proposed transaction in at least
one local, widely read newspaper.

After receipt of the initial notice, my office will request additional information from the parties
involved in the sale. We will look at issues such as whether the transaction appears to be
transparent. We will consider the impact of the sale on the availability and cost of healthcare in
the community. As with other transactions involving nonprofit organizations, sales of public
benefit hospitals must be fair to the nonprofit or governmental entities involved. The nonprofit
should receive fair market value for its assets. Furthermore, any restrictions such as ‘no sale’
provisions in charitable gifts to the nonprofit must be resolved by a court.

As with other nonprofits, members of the public who serve as officers and directors of a public
benefit hospital can help ensure they properly fulfill their fiduciary duties by keeping detailed
records of board meetings and all business decisions. These and other documents requested by
the Attorney General’s Office for review of a public benefit hospital transaction must be
provided at least 45 days before the scheduled closing date. Otherwise, the transaction may be
delayed or even blocked.

Because we are lucky in Tennessee to have a vibrant nonprofit sector and many people
interested in providing charitable gifts, the Public Interest Division in my office handles an everincreasing
case load. While my office cannot provide specific legal advice to individuals and
organizations, our nonprofit website, which can be accessed at
http://www.tn.gov/attorneygeneral/nonprofit/nonprofit.html is an excellent resource, and we
are happy to answer questions about the exercise of our duties in this area.